Definition: Activity Based Costing

is a costing method that assigns overhead and indirect costs to specific products or services based on the activities required to produce them.

is a precision-focused managerial accounting method that assigns overhead and indirect costs to products and services based on the specific activities required to produce them. activity based costing definition

Splits the $1,000 based on production volume . If Pens make 90% of units and Watches 10%, Pens get $900, Watches get $100. Result: Pens are overcosted; Watches are undercosted. is a costing method that assigns overhead and

To understand the activity-based costing definition, you must look at the four pillars that support the system: Pens get $900

A "bucket" where all costs related to a specific activity are grouped together (e.g., a "Maintenance Cost Pool").